Investigating and prosecuting Libor culprits

May/June 2015

ByTim Harvey, CFE, JP

Global Fraud Focus: Examining cross-border issues

The global financial crisis revealed bad policies, practices and pitfalls along with outright criminality in global banks. Far-reaching internal and external investigations are finding culprits who unlawfully manipulated the London Interbank Offering Rate (Libor) — one of the cornerstones of market balance.

We discussed the Libor scandal in an earlier Global Fraud Focus column. (See
Bankers without ethics, Fraud Magazine May/June 2013) Since then, both the U.K. Serious Fraud Office (SFO) and the U.K. Financial Conduct Authority (FCA) have been very busy.

An SFO release reported a senior banker (whose identity is protected by a court order) from a leading British bank pleaded guilty at Southwark Crown Court on Oct. 3, 2014, to conspiracy to defraud in connection with manipulating the Libor. This is the first criminal conviction resulting from SFO investigations into Libor manipulation.

"Whoever this banker is, his or her bosses who created the culture that allowed this to happen must be held to account," said Labour MP John Mann, who sits on the Treasury select committee, according to the March 4, article
Bank of England embroiled in money-market fraud probe, by Caroline Binham, in the Financial Times.

In the article, Chris Leslie, shadow (opposition) Treasury minister, said, "This is not down to a single rogue individual. This is just the beginning of a long process of weeding out a crooked culture in banks which has deep roots." The SFO charged 11 others who await trial.

U.K. Treasury Department spokesman said that those found guilty of playing a part in the scandal should feel the "full force of the law," according to the Oct. 7 and 8, 2014, article in the Daily Mail, "Banker admits rate rigging — but you can't know where he works," by James Salmon and Vanessa Allen for The Daily Mail and Martin Robinson for Mailonline.

Seven banks and brokerage firms have settled allegations of interest-rate rigging in the U.K. and the U.S., according to The Mail article, including: Barclays, fined £290 million in June 2012; Royal Bank of Scotland, £390 million; and Lloyds, £148 million.

Related Articles

Where are these three infamous cases now?

Over the last few issues I’ve explained numerous financial reporting schemes using cases that might be obscure to some. However, in this column, I revisit three cases that captured the headlines when their stories first broke. Since then, their sagas have been relegated to the back pages, but they continue to have interesting developments.

This issue’s cookbook is devoted to two recent and interesting cases involving revenue manipulation — the most popular method of cooking the books. But I serve up several menu options in these cases. Which would you prefer today: round-tripping, channel stuffing or perhaps an order of side deals? Let’s get cooking.